st: re: heteroskedasticity and fixed effects

-whitetst- (or, pardon the self-plug, -ivhettest-) after -regress- with
fixed effects inserts as dummies by hand probably won't be appropriate,
for the reason I gave in my previous email.

>From what I know about -xttest3-, it won't be affected by the
Stock-Watson results, but this is just a quick guess. Kit Baum is the
author of -xttest3- and he or someone else would be better placed than
me to say (as I gather he just did!).

Actually, per my prior posting, -whitetst- is one of those tests that
only makes use of residuals from a regression, and is thus immune to
problems with the variance-covariance matrix. All that is needed are
consistent point estimates. The White general test is a special case
of the Breusch and Pagan test (q.v. -bpagan-, or more generally -
ivhettest-).

Note, though, that the alternative hypotheses of the White / Breusch-
Pagan and -xttest3- tests differ considerably. The latter evaluates
whether the squared residuals are correlated with a set of dummies
for the individual panels. The White test considers whether there is
correlation between squared residuals and all regressors, squared
regressors and cross-products of regressors. The B-P test allows you
to choose the variables in that list (which may thus include
variables not in the original regression).

I wholeheartedly agree that the cluster-robust VCE is the most
sensible thing to apply in the -xtreg, fe- context. Of course, the vce
(bootstrap) could be used to evaluate whether the cluster-robust SEs
look reasonable.